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Grupo Bimbo

Bimbo’s globalization
challenges
 INDUSTRY COMPETITION - Highly
fragmented and competitive industry
structure, with different players in
different countries

 DEMAND PATTERNS - Consumption habits


heavily influenced by cultural legacy,
demographics, tastes, fashion (e.g. low-
carb diets in the US), and price sensitivity

 DISTRIBUTION NETWORK S - Retailers


bargaining power and location, country
geography , transportation infrastructure,
as well as labor relations affect
distribution chain and costs

 ADMINISTRATION - Regulatory frameworks


vary widely among countries for labor
relations, new business registration,
bankruptcy filing
Mistakes in BRAZIL….
 Grupo Bimbo entered the Brazilian market
wrongfully assuming it was similar to the
Mexican one:
◦ Overall bread consumption is much lower in
Brazil than in Mexico; more specifically,
industrial bread consumption in Brazil is three
times less than in Mexico (2.5 kg per capita in
Brazil v. 7.5 in Mexico, in 2006, data from
Exhibit 4)
◦ European immigrants in South America have
maintained a tradition of artisanal fresh bread –
« Artisanal bread is king » (A. Diaz, Head of
Grupo Bimbo , Central and South America
Division)
◦ Taste for sweet goods differs from Mexico:
Brazilians prefer pound cakes, cereal bars and
products with milk cream, whereas Mexicans
like strawberry jelly filling
◦ Intense competition and relatively low demand
push prices down: industrial bread can be sold
at only $ 1.50 per Kg in Brazil v. $1.90 in
Mexico
◦ Unsuitable distribution strategy, targeting small
« If you want to be in South
America, you have to be in
Brazil » (A. Diaz, Head of Grupo Bimbo , Central and South
America Division)

Although
hardly
profitable,
Brazil is a
« must » market
for a group
that wants to
have a presence
in South
America.
…. and ways to recover.

 Control costswith a new distribution


strategy adapted to the local market
structure (as already initiated, deal
directly with large retailers and use
independent operators to supply small
retailers)

 Improve revenue by offering new, different


products, better suited to local taste,
particularly in the promising confectionary
sector, a growing market although still
representing only 65% of Mexican sales in
2006 (based on data in Exhibit 5))

 Make Brazil a knowledge and innovation


« lab » for the group.

 Use sound market research, instead of
blind guessing….

U .S . M A R K E T C H A LLE N G E S
S tra te g ic im p o rta n ce o f lo ca l In T h e U . S . M a rke t,
e n viro n m e n t B im b o ’ s stra te g y is
re su ltin g in a
C “ Contributor ” position,
o b e ca u se o f th e stro n g
m im p o rta n ce o f th e lo ca l
p e n viro n m e n t, sp e cifica lly
et in te rm s o f p ricin g fo r th e ir
e p ro d u ct a s w e lla s th e ir
nc la ck o f b a rg a in in g p o w e r
e o n th e d istrib u tio n sid e .
of T h e ir co m p e te n ce in te rm s
lo o f o p e ra tio n s is a ffe cte d
ca b y th e u n io n ize d tru cke rs
l o n w h ich th e y h a ve to o
or lim ite d p o w e r.
g
a
ni
za
ti
Bimbo’s U.S. MARKET
CHALLENGES
CAGE
 Culture: analysis Geographic
 consumption patterns are strongly –position of the U.S. is an
related to Diet trends
q “Low Carb” movement
advantage in proximity
q well being / healthy lifestyle are –as well as market demand
general trends influencing many similarities
other industries as well as
competitors (Nestle’s new goal:
health & foods) Economy:
q Bimbo focuses on Hispanic oPrice premium not
immigrants segment (emotional
ties) applicable in the US
 Administrative: oLabor costs:
q Distribution = biggest Insurance
challenge: Unionized labor
 Bargaining power of large
retailers:
o Pricing dictated lower
prices
o Supply patterns: Full
shelves requirements
even if not in line with
consumption
o Buy back agreements
o Timing delivery
q Supply management:
 Conflicting goals of
unionized truckers and
U.S. Market:
recommendations
 Rationalize product portfolio to better meet
customer demands
◦ Better targeted products: Taste/ needs: well being
products
 Strategic decision response to the “Low-Carb” and Diet
trends: “pull” marketing strategy in terms of product
specification needs form the market, the Health
trend is undeniable
◦ Technological improvement may allow freshness and
new dietary requirements.
 Earn the price premium:
◦ Improve product quality to justify premium pricing
 Unionized truckers - can’t change the
operational model therefore, communicate

on Corporate Social Responsibility and

employee empowerment.


Yes, go CHINA!
Strength Opportunities
Adapt to Lessons learned: Have lessons learned of Distribution: Have a well-established distribution network
entering the new market (Brazil, US, etc…)
Prone to adaptability: Technology advancement:
Able to understand the Chinese consumers’ needs through

past experiences & in-depth research (focus group) - Increase product shelf life and production process
 Able to adapt to Chinese culture (“Learning the Chinese

way”) - Increase productivity

Strong market position: Acquired a Chinese company Product Advancement: Able to capitalize on making new
that has strong market share (55% & 35% market share for products with local recipes & capitalize on acquired
Beijing) company’s existing local products
Marketing & promotional strategy: Able to successful Negotiation Ability: Has the opportunity to gain more
implement promotional strategies based on adaptability market power in hyper market chain
(successful in store promotion, university road shows,
product samples, etc…)
Strong employee involvement: Big market: Able to generate large revenues from the large
- Motivated to learn Chinese population

Increased consumer health awareness: Consumers


switch to low carb diets
Fast-growing & developing bread market
Source:
http://www.franchiseek.com/Market_Trends_Bread_China_
0505.htm
Yes, go CHINA!

Weaknesses Threats
Loss in revenues: Continueoperating sales loss of ≈ China market is highly fragmented
$1 Million despite high sales
Pricing & segmentation strategy: Implemented Local & international competitors:
pricing & segmentation strategy were not managed Competitors also have networks, factories and expertise

properly by prior owners in marketing and production


Improper cost structure strategy Maintenance: Product
84% is still small quality
artisanal and with
otherthe production
shops (may have
standard in the factory
price competition)
Diverse consumer demand & taste: in different
provinces (e.g. Sichuan likes spicy, Shanghai likes buns,
etc…)
Government support & policies:
The changes in law or the support in local companies
Bimbo in China
Strategic importance of local
environment

Co
mp
et
en
ce
of
lo
ca
l
or
ga
ni
za
ti
on
Decision to enter China
High

Mid

Low

Organizationa Low Management


Strategic Operational
Fit l Development Discipline
Performance Performance
Recommendations for
China
 Continue their current
strategies:
◦ Adaptability: Constant
improvement &
advancement of existing &
new products to meet local
needs
◦ Continue effective
promotional campaigns
◦ Maintaining standards and
improvement of technology
to be ahead of its
competitors (e.g. longer
shelf life)
◦ Continue to build good
relationship with hyper
market chains &
government connections
 Educate more customers on
health-related issues and
western-style products
Thank
you for
your
attention
!